When the Treasury announced that £5.67 million of funding will be provided to Britain’s Illegal Money Lending Teams (IMLT) and bodies in Northern Ireland to tackle illegal lending, this was of course met with a welcome response, representing a 16% increase compared to the previous year.
This sum will be used to crack down on so-called ‘nasty lenders’ while also encouraging people in England who are deemed to be at risk of being targeted to join credit unions, as well as supporting a new project in Northern Ireland to raise awareness of the dangers of loan sharks.
England’s Illegal Money Lending Teams (ILMT) has already made over 380 prosecutions leading to 328 years’ worth of sentences since it was established in 2004, so the additional funding will provide further support for investigations into unscrupulous, unregulated practices.
Unlike regulated lenders, illegal lenders are not transparent and are often initially viewed as family or friends to the victim yet they leave no paper trail and often resort to threats, intimation or even violence. Victims of loan sharks are often too scared to report any incidents meaning the number of lenders operating in the shadows is difficult to quantify.
A press release from the Treasury attempted to quantify this at over 300,000 people in debt to illegal money lenders in Britain. However, in 2017, the Financial Conduct Authority published a report detailing consumer experiences of illegal lending in the UK which said they were unable to establish hard evidence of the number of consumers involved in unauthorised lenders, so the figure could potentially be substantially more.
The spectre of illegal lenders perhaps takes on more significance when set against a background of stagnant wages, rising living costs, ‘just about managing families’ and a reduction in the availability of consumer credit. It means many vulnerable borrowers may resort to using the local “friendly lender” who has always been part of the community culture – aka the dangerous, illegal loan shark.
The FCA’s Financial Lives Survey (2017) also found that of those surveyed, 7% of UK adults were borrowing from friends and family, or had done so in the previous 12 months, while 0.2%, (just under 100,000 UK adults) had used an unregistered lender in the last year. Yet once a loan is given, many victims will find it impossible to repay as “the lenders seek them out, put them in their debt and seek to keep them there – providing the lender with an ongoing income stream.”
Last week the Illegal Money Lending Team issued a press release encouraging community groups to bid for grants up to £5,000 for projects which will raise awareness of illegal lending. The funds have been made available from monies confiscated from convicted loan sharks through the Proceeds of Crime Act (2002) and the overall aim of this national scheme is to see the illegal earnings being used wisely to benefit key areas and reinvest the money back into local communities.
The scheme is to be applauded as the raising of awareness may help to stem a possible increase in the activity of illegal lending practices. Lenders operating below the regulatory radar have always existed: “They are part of a way of life and within the fabric of many communities,” but we must ensure that awareness is raised, alternative options are sought and that access to responsible, fair and regulated credit is maintained.
Greg Stevens, Chief Executive Office, CCTA